Economics of the United States
What are the major U.S exports and imports?
The United States of America is known as a state of great accelerations in its economic systems. With its high growing population and high rates of industrialization, the economy of the American people has continued to expand tremendously. Additionally, the economy of the United States is mixed and highly developed. It is also ranked as the global largest economic system based on its nominal Growth Domestic Product. The states are involved in international trade, with the main focus being on the exports and imports that boost their economy.
Exports and imports are among the primary boosters of the economic growth realized in the United States of America. Exports involve selling of the goods and services that are produced domestically, to other nations. On the other hand, imports entail the buying of both finished goods and raw materials from another nation. Both exports and imports are significant factors in the economy of the country. The imports help the United States to find new goods and services that it does not produce because of various reasons such as environmental factors. Exports assist the state in earning more income that also grants it more ability to purchase imports. These two result in the balancing of the trading activities of the United States of America, hence granting it a stable economic growth and development. McEachem (2011) argues that a country must make good economic choices when it comes to exports and imports and their influence on the growth of the economy.
The United States of America obtains a lot of foreign income from its exports. Some of its major exports include the processed petroleum oils, crude oil, cars, automobile parts and accessories micro-assemblies, transportation equipment, petroleum gases, electro-medical equipment, iron and steel craps, leather products, wheat products, wood pellets, computer and electronic products, and aerospace products and parts. The transportation equipment is the leading commodity being exported. Computer products follow it, and then aerospace products. Based on microeconomics, the sum exported goods of the United States of America represent 7.7% of its whole Gross Domestic Product.
It imports numerous products from other countries. They include computer machinery, electrical machinery, vehicles, mineral fuels including oil, pharmaceuticals, medical, optical, and technical apparatus, organic chemicals, gems and precious metals, furniture, and plastics. From the list, it has been realized that America imports many pharmaceutical products, followed by other medical products and then vehicles.
How does international trade affect U.S. consumption possibilities?
International trade involves the processes of exchange of goods and also services between nations that are its members. International trade plays an important role because it allows every nation to expand its market boundaries (McEachem, 2011). The expansion allows more goods and services into the country that could not have been found through domestic means. Consequently, international trade makes the market more competitive for the Unite States as it engages in business with other nations. The international community helps in supplying the trade market of the United States. In most situations, the imports realized in America overdo exports. Therefore, it shows that international trade determines the patterns of consumption and consumption possibilities. The availability of the import commodities in the international market is vital because it determines the consumption possibilities of the United States. As a result, when the international prices of commodities rise, the frontier of consumption possibilities in the United States undergo an inward shift, and this poses a reduction in the country’s imports’ consumption (Gervais, 2016). Similarly, a decline in the world prices of commodities would increase the states’ consumption of imports.
What determines which goods a country should produce and export?
As a basic requirement, an endowment of resources is a central and significant factor that determines the type and amount of goods as well as services that a nation produces and exports. From an economic point of view, resource endowment is the root basis for large-scale production. This is also characterized by economies of scale that grants certain nations a comparative advantage concerning the production of specific goods and services. A country that has adequate technological tools has the potential to produce enough goods and services that can match the domestic demands and provide additional for exports (Lee & Yue, 2017). When the nation specializes in the production of such goods, fewer costs would be realized because of the availability of abundant resources which do not need a high amount of expenditure for their acquisition.
Additionally, absolute advantage informs us about the type of a country that is best fit to produce specific goods and services in a faster, better and cost-effective way. For example, the United States would like to produce wheat and exports it to other nations because the nation is characterized by good climate and soil which are favorable factors that permit farming (Lee & Yue, 2017). Therefore, this endowment grants the United States an additional advantage of producing the product through faster and more efficient ways. Consequently, the nation would incur less cost than could have been realized if the wheat was imported. On another scenario, importation of coffee by the United States is also supported by this argument. It is cheaper for the state to import coffee than to have it produced domestically. The United States engage in a lot of trading activities in the international market. Its imports and exports registered yearly positions the states as part of the top five countries that greatly contribute to the growth of the global markets (Lee & Yue, 2017). The United States trades nearly all kinds of goods and services. The absolute advantage and endowment of resources in the production and consumption of the goods and services are the central factors that determine whether the United States of America would prefer to import or produce and then export a commodity.
What is the World Trade Organization, and how does it help foster multilateral trade?
The World Trade Organization (WTO) has played a primary role in expanding access to markets, establishing rules that ensure that there is fairness in the international market and also to aid in the proper ways of solving trade disputes experienced in the global market. The World Trade Organization is an international organization that deals with the trading rules between nations. It entails signed agreements that have been discussed and signed by most of its members. The main goal of the WTO is to provide a favorable atmosphere for producers, exporters and importers of goods and services (Cottier, 2015). It is established to allow free and easy flow of trade activities and easy predictability in the business market.
The WTO was established from the General Agreement on Tariffs and Trade (GATT) which was formed in 1947. Its rationale was based on the most favored countries. It was formed to assist every country in finding a neutral status so that no state would have a business advantage over others. In 1995, the WTO took over GATT’s place. Under the WTO, the members of the organization are committed towards a common purpose of creating and adhering to non-discriminatory and binding rules (Cottier, 2015). Every member state has equal opportunities and voice when it comes to enacting new rules. Also, decisions of the organization are reached based on a consensual and binding agreement. The WTO’s common goal is to break any obstacles to trade and to foster effective strategies of doing trade globally. The WTO carries its objectives through transparency strategies while paying close attention to the binding way of settling disputes. Therefore, this organization is regarded as a legal foundation of the international system of trading.
Not only does the World Trade Organization offer a platform for negotiation to draw new rule and regulations, but it also constantly checks the existing treaties that have been put in place by the member states. The different duties of the WTO are outlined in various single treaties (Cottier, 2015). They include General Agreement on Tariffs and Trade (GATT), General Agreement on Trade in Services (GATS), Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), Government Procurement Agreement (GPA) and Information Technology Agreements (ITA I and II).
The World Trade Organization has played a significant role in fostering multilateral trade. As already mentioned, the organization’s main role is to bring various nations together with the intentions of setting rules that govern how they conduct trade across their borders. The organization is a central pillar in promoting international cooperation between various countries. It has been active in enacting numerous trading rules that have seen many countries joining the multilateral trade. The organization has a well-established integrated framework that allows multilateral partnership between many countries (Cottier, 2015). The World Trade Organization has liberalized the trading system and has also enhanced access to markets. The organization has led to real progress and brought a reassurance that different governments are very committed to ensuring that global trade is liberalized (McEachem, 2011). Besides, it has also been able to establish good investment plans that are used in developing multilateral rules that support the new business realities that promote effective management and planning of the global business.
The World Trade Organization has also accelerated multilateral trade by establishing a tariff threshold which has helped in the elimination of low tariffs attributed to various commodities. By developing effective mechanisms of solving disputes faced in trading activities among countries, multilateral has been made possible. The strategies used to solve trade disputes have brought peaceful relations between countries participating in the global trade (Cottier, 2015). The primary role of the WTO in fostering multilateral trade is to ensure that the countries work and cooperate to ensure that trades are done to achieve their overall goals and objectives.
Firms hurt by cheap imports typically argue that restricting trade will save U.S. jobs. What’s wrong with this argument? Are there ever any reasons to support such trade restrictions?
The arguments provided by such firms are quite superficial and have no economic foundation. Restricting trades can have far-reaching impacts on the economy of the United States, and it will not save jobs in the states. This argument does not have any valid support. Restricting trade will interfere with the growth and development of the economy of the United States. Increased availability of goods being imported will put the consumers in a better position (Jeong, 2020). Similarly, raising the number of goods being produced will provide additional employment opportunities.
There are no absolute reasons to support this kind of argument because incorporation of trade barriers on the economy of the United States are known to cause more economic harm than benefits. Restrictions of trade, for example through tariffs, increase the cost and lower the availability of goods and services in the United States. As a result, there will be lower-income, reduced employment and a general lower economic output in the country. This is an indication that trade restrictions are associated with numerous negative economic consequences that cannot save U.S. jobs (Jeong, 2020). The costs of offering job protections are mostly accrued from tax or consumers. Also, the costs of job protection exceed the possible costs attributed to finding new jobs for the workers.
Restrictions on trade are likely to result in high consumer costs. Based on the institute for international economics, the trade barriers attract American consumers about $80 billion annually. Besides, it also increases the cost of consumer products, such as sugar (Jeong, 2020). Another consequence associated with trade restrictions is that it discourages industries and protected firms from incorporating changes that are required to challenge competition from other countries. Furthermore, when the protected firms have acquired government support, through export subsidies or import restrictions, they may have reduced incentives that they may use to improve their management and efficiency. Eventually, they may remain fully dependent on the support of the government to sustain their survival (Jeong, 2020). Generally, trade restrictions are a primary stumbling block to the country’s efforts to achieve development. Having trade restrictions will not boost the economy of the United States, but lower it. Moreover, these restrictions may make the domestic market full of subsidized and cheaper products. Based on these arguments, there are no reasons to support the restrictions on trade.
In conclusion, the United States of America has one of the fastest-growing economic systems. With its high growing population and high rates of industrialization, the economy of the American people has continued to expand tremendously. Additionally, the economy of the United States is mixed and highly developed. It is also ranked as the global largest economic system based on its nominal Growth Domestic Product. The state is involved in international business, through exports and imports that enables it to continue undergoing a tremendous economic transformation. In addition, the United States is highly endowed with various resources that grant it the opportunity to decide whether to export or import a particular commodity. The United States also engages in various international trades which make it have the opportunities requires for continuous prosperity and success. Finally, the U.S. is careful enough not to implement trade restrictions that will hinder the growth of its economic systems.
References
Cottier, T. (2015). The common law of international trade and the future of the World Trade Organization.
Gervais, A. (2016). The impact of price variability on U.S. imports of homogeneous inputs. Economics Letters, 143, 16-19.
Jeong, J. M. (2020). Economic sanctions and income inequality: impacts of trade restrictions and foreign aid suspension on target countries. Conflict Management and Peace Science, 0738894219900759.
Lee, J., & Yue, C. (2017). Impacts of the U.S. dollar (USD) exchange rate on economic growth and the environment in the United States. Energy Economics, 64, 170-176.
McEachern, W. A. (2011). Economics: A contemporary introduction. Cengage Learning.